Copper concentrate market participants lost amid ‘unstoppable’ declines in TC/RCs

Participants in the copper concentrates market are struggling to comprehend an “unstoppable” decline in treatment and refinement charges (TC/RCs), with every week bringing spot deals at fresh lows and rumors each “crazier” than the last, sources have told Fastmarkets

Copper concentrate TC/RCs have been collapsing since the fourth quarter of 2023, following the closure of Frist Quantum’s Cobre Panama mine in November.

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Fastmarkets most recently calculated the copper concentrates TC index, cif Asia Pacific at $5.90 per tonne per tonne on Friday March 22, down from $9.40 per tonne the week before and a fresh all-time low. Fastmarkets carries historical pricing data for the market as far back as June 2013.

The latest calculation marks a decline of 93.4% since the 2023 peak of $89.20 per tonne, reached on August 4.

“I have never seen anything like this. [I am] not sure how and where the respite is going to come,” a trader said.

“When I think the market is already at its bottom, a new low number comes, and this has happened many times this year; it’s an unstoppable decline,” a second trader said.

A third trader noted that copper smelters still need to buy stocks and added that there is nothing obvious that will stop TCs from declining further.

Current spot TCs are already at a very low level that is challenging for all copper smelters in the industry, participants said.

“The market is at a crucial point now, with the low spot TCs already challenging every smelter in the industry, [and] it is highly likely that the situation [of low TCs] will not be easing notably in the short term, meaning [some] copper smelters will be phased out,” the second trader told Fastmarkets.

One miner source said that they are internally monitoring the smelter side of the industry and that they are expecting some smelter closures in the coming months due to profitability challenges.

“Deficit markets can’t actually exist,” a second miner source said, adding that the current smelter-miner balance would not last.

This is because supply and demand will eventually have to meet; any prolonged deficit in concentrate supply would either be resolved by smelter closures or improved supply, according to sources.

“The market will finally find a way out, and the thing is if you can manage to stay ‘live’ till the end,” a fourth source said.

There are some smelters in China that have already reduced operating rates due to difficulties in securing raw materials at suitable prices in a tighter copper concentrate market, with ways being discussed to combat the challenging conditions including controls on new copper smelting capacity.

At the same time, risks are also growing for smelters that are short of cash in the current market, sources said.

Additionally, multiple miner and trader sources have told Fastmarkets that some smelters have agreed to buy at a fixed number of close to $10 per tonne recently or to use Fastmarkets’ spot index to secure tonnages for production during the remainder of year.

Copper smelters typically have some percentage of copper concentrate contractual supply tied to 2024’s benchmark number, which was agreed at $80 per tonne between Chilean miner Antofagasta and China’s Jinchuan Group in November 2023.

With the agreed benchmark well above spot levels smelters will have some cushion against low TCs, depending on how much of their capacity is tied to annual contracts at the benchmark number.

“Little optimism for increased copper concentrate supply and new smelter capacity out of China are pushing some smelters to lock in the materials in advance, and the number is the second thing,” a fifth source said.

Freeport-McMoRan, the operator of Indonesia’s Grasberg copper mine, will see its current export license for copper concentrate expire in May, meaning it will not be allowed to export the material after this date should it not receive the necessary renewal from the Indonesian government.

The Grasberg mine, one of the world’s largest copper mines, produced 1.66 billion lb of copper – 752,963 tonnes – in 2023, up from 707,604 tonnes in 2022, according to Freeport.

This will be another blow to global copper mine supply side following unexpected supply disruption, limited investment in new projects, downgrading of output guidance at mines, declining ore grades among others, according to some participants.

“We are getting closer and closer to Indonesia exporting less, and Adani’s large Indian smelter will also start taking delivery of concentrates in the second half of the year,” the fifth source, noting that despite it being a long-known fact that Indonesian concentrates would leave the global market, the realty of it happening is hitting the market.

Find out more about out market-reflective copper price data spanning the copper supply chain, from copper concentrates and copper wire to copper scrap. Talk to us.

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